#Liquidity101

Liquidity is one of the fundamental pillars in any financial market, including the cryptocurrency economy. It refers to the ease and speed with which an asset can be bought or sold without drastically affecting its price. A market with high liquidity has numerous buyers and sellers willing to trade at close prices, which reduces the spread (the difference between the buying and selling price) and ensures more efficient executions. In a low liquidity environment, when trying to buy or sell large amounts, the price can 'slip' considerably, generating higher implicit costs. In decentralized exchanges, liquidity comes from pools funded by liquidity providers, who deposit asset pairs in exchange for fees. Understanding the importance of liquidity will help you choose the right time and platform for your trades, avoiding sharp price movements and optimizing your results.